Much ado about nothing

European equities – much like rabbits caught in headlights – don’t know which way to go ahead of tonight’s FOMC statement.

Aerial view of London
Source: Bloomberg

Equity inactivity and the mild bounce in GBP/USD seen today have given a feeling that tonight’s FOMC statement and rate decision could be ‘much ado about nothing’. Prior to the FOMC decision, currency markets have been giving a 23% chance that rates would be increased in September with institutions thinking that December now appears to be the most popular start time.

The economic releases coming out of the US this week have not really helped convince the sceptics that Fed Chair Janet Yellen is ready to pull the trigger, as a continuation of her cautionary tactics looks the most likely outcome. As is frequently the case, it will be the accompanying comments attached to the decision that are  most likely to lead trader’s sentiment.

The more seasoned market watchers will be conscious that the usual modus operandi from these events will ensure that the redundant phraseology will be open to interpretation by bulls, bears, hawks and doves. 

The second profit warning in the last two months has seen shares in Premier Farnell fall 17% today as investors’ patience has been stretched too far. Weir Group, soon to be relegated out of the FTSE 100, has also seen its shares knocked as the recent mild bounce already appears to be running out of steam. Merlin Entertainment could be feeling the consequences of this summer’s Alton Towers disaster for some time to come as the company saw expected earnings to continue being affected into 2017.

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